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2021 (3) TMI 655 - AT - Income TaxDisallowance u/s 14A - CIT(A) deleted the addition made by the AO u/s. 14A on the grounds that the assessee has earned tax free dividend income only and the company had sufficient own funds to invest - revenue filed appeal on the grounds that the disallowance u/s. 14A is not dependent on the exempt income - HELD THAT:- There must be actual incurring of expenditure and the expenditure must have clear relationship with exempt income. Section 14A cannot be invoked to disallow expenditure on the basis of assumption. Where the assessee claims that no part of expenditure was incurred or points out and certain expenditure on having been incurred in relation to income which does not form part of total income, the Assessing Officer has to, before making any disallowance u/s. 14A of the Act, record his satisfaction giving reason for not agreeing the claim of the assessee. The reasons, satisfaction recorded must justify the ground on which the claim of the appellant is not accepted. Reliance is placed on the decision of Delhi High Court in the case of Maxopp Investments.[2011 (11) TMI 267 - DELHI HIGH COURT].Without prejudice to the above the disallowance u/s. 14A cannot exceed the exempt income - we are unable to agree with the inference of the Assessing Officer and decline to interfere with the order of the ld. CIT(A). Correct head of income - Lease Rentals - AO held that the income of the hire charges are to be chargeable under the head "income from other sources" but not under the head "business and profession" - CIT(A) deleted the addition holding that the revenue having accepted all along that the lease rental income earned as business income cannot suddenly change the tract and consider the business income as income from other sources - HELD THAT:- CIT(A) held that it becomes all the more relevant when the exercise to changes the heads business or other sources is purely academic having no impact on the revenue. The Assessing Officer has not brought out any new facts or circumstantial to justify the change in opinion regarding head of income. Therefore, disallowance made by the AO in the impugned order is deleted. Having gone through the rationale given by the Assessing Officer which is not the correct position of the law, the order of the ld. CIT(A) giving relief based on the stand of the revenue for the earlier years and on going through the provisions of Section 71, we hold that such change of head of income is an infructuous academic exercise and accordingly the appeal filed by the revenue is hereby dismissed.
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